Superannuation: Switching and Roulette Wheels
AbstractThe introduction of choice has resulted in Australia’s superannuation system providing unprecedented flexibility (through increased investment options and the timing choices) for members to optimise their expected benefits. This paper examines the impact of switching between investment options using a normalised ranked return or “roulette wheel” approach developed by Bauer and Dahlquist (2001) for the Australian setting. The paper tests various switching strategies for both single-sector and blended options, for the period 1985–2005, finding that members require forecast accuracy of around 70% to be successful at market timing. Finally, the paper considers the impact of switching strategies on accumulated balances.
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Bibliographic InfoPaper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 216.
Date of creation: 01 May 2007
Date of revision:
Note: Michael E. Drew is in the School of Economics and Finance, Queensland University of Technology. The author acknowledges the financial support of the Australian Research Council’s Discovery Project funding scheme (#DP0452336, “Modelling the Risk of Defined Contribution Superannuation Plans”). The editorial contribution of Hazel Bateman (Guest Forum Editor) is sincerely appreciated, as are the comments from two anonymous reviewers. All remaining errors are the sole responsibility of the author.
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Superannuation; investment options;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-23 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Becker, Connie & Ferson, Wayne & Myers, David H. & Schill, Michael J., 1999. "Conditional market timing with benchmark investors," Journal of Financial Economics, Elsevier, vol. 52(1), pages 119-148, April.
- Robert Faff & David R. Gallagher & Eliza Wu, 2005. "Tactical Asset Allocation: Australian Evidence," Australian Journal of Management, Australian School of Business, vol. 30(2), pages 261-282, December.
- Connie Becker & Wayne Ferson & David Myers & Michael Schill, 1998. "Conditional Market Timing with Benchmark Investors," NBER Working Papers 6434, National Bureau of Economic Research, Inc.
- James Tobin, 1956. "Liquidity Preference as Behavior Towards Risk," Cowles Foundation Discussion Papers 14, Cowles Foundation for Research in Economics, Yale University.
- repec:ecu:wpaper:2008-05 is not listed on IDEAS
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